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Auto dealers somewhat responsive to facility upgrades

Orlando, Fla. -- Dealers' attitudes appear to be improving about manufacturers' facility image programs, but many still take issue with demands to cookie-cutter dealership looks across the nation.

In an about 60-page study released Saturday, Glenn A. Mercer, an independent automotive consultant hired by National Automobile Dealers Association, said dealers are "mildly positive" about facility upgrade programs. Mercer said improving business conditions likely are a factor in their change of tone over the past year.

"This is receding somewhat among the dealership body as a burning issue," Mercer said during a news conference Saturday during the NADA Convention and Expo, which is expected to draw about 21,000 attendees.

Many automakers have implemented voluntary dealership renovation programs and have encouraged participation. But some manufacturers require specifics such as floor tiles from one manufacturer, which has irritated some dealers who spend millions on the upgrades.

Mercer said automakers need to provide dealers with more realistic sales forecasts for expansions and provide better business cases for facility image programs.

Dealers take most issue with automakers' standardization programs, which require stores to look the same no matter where they are located.

Mercer said he could not find an example of where standardizing dealerships pays off and said spending on this "is almost always a pure deadweight loss."

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He said an automaker told NADA that they were trying to be like Apple stores. But Mercer said Apple standardizes on the process, not looks.

"Where is the customer out there who says and walks into a brand X dealership in Atlanta: 'it doesn't look like the one I went to in LA. I'm not buying this car,'" Mercer said.

Dealers who renovate "dilapidated" stores will see a return on investment and those who expand service areas can earn all money back in a few years, Mercer said.

Dealerships of the future will continue to serve the same functions come 2025, but could be more efficiently designed such as moving some support areas off-site, Mercer said.

It's unlikely dealership size will grow in the future, but more vehicles may be stored off-site and dealers may get more innovative on the service side, he said.

Dealers might consider a service location at an airport, where vehicles are parked for days already, or offering satellite service locations or even picking up a car when it needs service to eliminate consumers waiting in dealerships.

The service side of a dealership can generate half of its profits and will remain critical in years to come, NADA says.

Manufacturers and dealers will need to work together to come up with creative ideas and be flexible when updating brand image campaigns that will keep costs down for dealers.

It's possible dealers could use a full-sized holographic display system to showcase cars and not require all to be parked on site.

"We can not just keep expanding showrooms to put 50 cars in the showroom," Mercer said.